Search Here for Stellar Stocks

Gearing your portfolio toward ethical stocks makes long-term sense.

America needs an ethics lesson, and we got the hint of one last week. When Goldman Sachs(NYSE: GS) executive Greg Smith publicly resigned with a stinging rebuke published in The New York Times, ripples coursed through the media and Wall Street. The shock wasn't the accusation that Goldman Sachs abuses its own clients, but that one of its own had just validated such accusations and ditched the "toxic, destructive" environment in a very public way.

New York Mayor Michael Bloomberg's response -- visiting Goldman Sachs in the midst of this public-relations debacle to underline that the company is a "vital part of the city's economy" and being subjected to "unfair attacks" -- fits into our lesson, too. In America, it seems many in corporate and political power allow money to trump morals, and they'll defend their own.

Forget that. Investors shouldn't take an "if you can't beat 'em, join 'em" approach and buy up shares of companies like Goldman Sachs. The future's always negative for those who think only of their own interests; those who live by the proverbial cutthroat sword eventually die by it, too.

We investors should simply search for ethical enterprises to support with our hard-earned capital.

Ethisphere emphasizes that it seeks out corporations that go beyond just saying they're doing business ethically and in fact prove they walk the talk and turn those words into action.

You'll find some of the "usual suspects" on the list. In fact, Patagonia, Starbucks(Nasdaq: SBUX), and General Electric(NYSE: GE) are among the 23 companies that have made the list all six years.

Consumers and investors probably aren't too surprised. Patagonia has made it clear that environmentalism is just as much a part of its mission as selling gear for outdoorsy types. Patagonia was a sustainability focused company before that was even cool. The company has an entire page of its site dedicated to its many environmental initiatives. Founder Yvon Chouinard also believes in treating employees well; the Financial Times mentions Chouinard's book, Let My People Go Surfing. Awesome, dude.

Starbucks' presence isn't shocking, either. Today, the coffee giant is holding its annual meeting, and word leaked out ahead of time that founder and CEO Howard Schultz will emphasize what Starbucks has always aspired to: good businesses' good works in the world. The New York Times' Joe Nocera attributed the following to Schultz's theme for the meeting: "The value of your company is driven by your company's values."

General Electric's Ecomagination program is also pretty well known, and it's more key than many might think. At the Investor Summit on Climate Risk and Energy Solutions at the United Nations earlier this year, GE revealed that its Ecomagination unit is growing at twice the rate of the rest of the massive company and has already generated $85 billion in revenue.

Sustainability done right isn't some value-destroying frivolity.

A good start for positive portfoliosThe list includes a few companies that don't get much press for being ethical leaders. The word "paper" might bring to mind decimating forests, but International Paper(NYSE: IP) made Ethisphere's list.

International Paper's business requires the use of substantial resources, not limited to wood fiber, but also extending to energy, water, and chemical use. In 2010, it reported improvements in global energy use and greenhouse-gas and sulfur emissions, and it has made increasing efficiency and reducing its footprint a goal.

It also has routine ethics training, which is required for its salaried employees, and the company donated more than $10 million to environmental education and literacy programs, health and human services organizations, and disaster relief efforts in 2010.

Granted, Ethisphere's list is by no means a list of stocks that investors must buy without further research and thought on their growth prospects; investing is never that easy. For example, Gap(NYSE: GPS) made the list, but despite all its good works, including a Human Rights Policy for suppliers, I'm not convinced its competitive positioning makes it a great investment.

Still, for those of us who want to avoid the world's Goldman Sachs type stocks, the list of the most ethical companies is a great place to start our research -- and begin the journey to more positive portfolios and long-term returns.

Author

Alyce Lomax is a columnist for Fool.com specializing in environmental, social, and governance (ESG) issues and an analyst for Motley Fool One. From October 2010 through June 2015, she managed the real-money Prosocial Portfolio, which integrated socially responsible investing factors into stock analysis. Follow @AlyceLomax